Economy
All You Need to Know About Trading in Currency Market
Online trading of currencies is gaining momentum all around the world since the last two decades. Africa alone today has estimated approx. 1.3 million forex traders, South Africa and Nigeria are the leading countries with around 400,000 traders locally combined.
The currency market is a decentralized international financial market where buying, selling and exchange of global currencies among buyers and sellers take place.
In the currency market, the values of currencies are determined based on supply and demand, and it is the largest financial market with transactions crossing over $6.6 trillion per day.
The bulk of currency trading volume comes from trading between banks, institutions, governments and companies. But approximately 5.5% of trading volume constitutes of retail investors and this figure is growing.
The advancement in internet, electronic trading tech, the rise of low-cost brokerages and the availability of diverse trading platforms to African traders have caused online trading to gain popularity among retail investors in Africa, especially Nigeria and South Africa.
How does currency or Forex market work? What decides currency rates?
Currency trading is the buying, selling and exchange of currencies like Euro or the US Dollar or any other two currencies against one another; where you give one currency to get another.
If you have travelled abroad or ordered something online from a different country in another currency like EUR or USD, then it is likely you have made a forex transaction.
Currency trading always involves trading between a pair of currencies. In contrast to stock trading where you buy a company’s share, it involves taking a position on a currency pair.
For example, GBP/USD represents the value of how much US Dollars you can buy with one Pound. If you think that Pound’s value will rise, you buy GBP with dollars. If your prediction is right, you could make a profit. Similarly, you can trade any other currency available in the Forex Market.
FX or currency market works on a simple economic concept of demand and supply. For instance, if there are more buyers for the US dollars in the market, its value will appreciate and vice-versa.
The demand and supply are affected by global trade, geopolitical events, interest rates and financial news. These factors create volatility in the currency market which in turn creates an opportunity for traders to speculate on the movements of currency prices.
For example, if the US Federal Reserve announces a higher interest rate, then US dollars will appreciate and other weaker currencies will likely depreciate against it.
What differentiates FX from other financial markets is that it operates 24 hours in different time-zones. It means when the trading day ends in the US, it begins in Japan and Hong Kong. That’s why currency prices are constantly changing.
How are currencies traded?
Currencies are always traded in pairs like EUR/USD or GBP/EUR.
There are mainly four ways how institutions, companies and individuals trade in FX market: spot contracts, swaps, forward and options. Swaps account for roughly 50% of the total FX trade.
Forex Spot, Forward and Swap Contracts
Most actual trade or non-speculative trade of currencies between banks, corporations, the governments take place using contracts like spot, forward and swaps.
In the Spot FX, currencies are exchanged at the current market price or exchange rate. Spot trades are usually settled within 2 days of contract and the majority of currency trading takes place through swaps.
Swap, also known as a cross-currency swap, is an agreement between two parties to exchange two different currencies at a predetermined spot-rate over a period of time. Swaps are more common among financial institutions or governments. Global companies usually get into a currency swap mainly for securing cheaper debts.
The forward contract is similar to spot trading, except in this the currency exchange occurs in the future. A forward contract entails an agreed-upon exchange rate, volume and a specified maturity date. When the contract reaches it maturity date, the buyer has to pay the amount at the agreed-upon exchange rate. The buyer may incur losses if the current spot rate is lower than the pre-agreed rate.
Currency Derivatives
Currency derivatives are of two types options or futures. Currency derivatives are considered one of the best options to manage currency-risks. They are usually exchange-based futures and options contracts. These future-oriented currency contracts can be purchased at a predetermined price and date.
FX Options is a contract where a buyer obtains the right to buy foreign currencies from a seller at a specified rate and date. The buyer, however, is not obligated to buy it. Similar to insurance, the buyer just needs to pay the premium to buy an FX Option. FX Futures contract is similar in nature but parties are obligated to settle the contract.
Multinational corporations usually use FX Options to protect their investments from currency fluctuations.
Locally in Nigeria, the Nigerian Stock Exchange (NSE) is planning to introduce financial derivatives next year. Currently, LCSE offers trading in four asset classes including currencies (both local and foreign). In the rest of Africa, JSE offers currency derivatives on all major currencies against ZAR.
Currency CFDs
A contract for difference (CFD) is an agreement between the two parties (trader and broker) to exchange the difference in the price of an underlying asset at the end of the trade. The difference in price is calculated from the point when the contract opened to when it ended. In CFD trading, neither broker nor the investor owns any underlying asset.
Most retail forex traders trade forex online as CFDs with retail forex brokers. But there are no locally regulated forex brokers in Nigeria.
All the best forex brokers available in Nigeria are foreign brokers that offer CFDs on currency pairs. As online forex trading is still unregulated in Nigeria, traders must ensure they only trade with top-tier regulated brokers for safety of their funds & fair-dealing; like through brokers regulated by FCA or ASIC or CySEC.
How currency trading can be risky?
The Forex market is inherently risky. The risks range from market risks like extreme volatility to other risks like the use of high margin.
Here are some of the risks that you should watch out for:
Market volatility and unpredictability
The forex market can be highly unpredictable. The release of a new economic data or a new bilateral/regional trade deal can cause volatility in the Forex market.
Major currency pairs tend to remain relatively stable. But exotic currency pairs which have lower trading volumes can be very volatile.
Volatile currencies tend to move in any direction based on a market event or even without it in some cases. The unpredictable movement can cause huge losses.
Leverage and margin risk
The availability of high leverage is one of the reasons why currency trading is why so many traders get attracted to it.
Leverage can amplify a trader’s profit but at the same time, the unwise use can cause significant losses.
For example, in a 100:1 leverage factor, a trader could trade USD$10,000 with just $100 margin deposit. So, suppose a currency pair made a 1 pip loss that means loss of $1. If it changes to 50 pips loss than half of your margin money could be gone in seconds.
Counterparty or third-party risk
Risks related to counter-party or market maker or Broker, where they are not able to fulfil your contract or order due to credit risk or volatile market conditions is another major risk factor. And sometimes these counterparties also deal in malpractices.
There have been numerous instances in the past when people were fooled through Ponzi schemes & bad brokers. For the safety of your capital, one must always choose a broker that is regulated by multiple Tier I and Tier II regulators.
Other risks to know
There are other associated risks too with trading currencies including Country risk, Interest Rate Risk, Transaction Risk, Liquidity Risk etc. One must understand all these risks and try to mitigate them before trading.
Another major risk is of losing money. There is no denying that Forex trading is very risky. Roughly 60-70% of traders lose their capital due to different reasons. However, unwise use of leverage is considered one of the top reasons for trading-losses.
One can possibly mitigate some of these risks by adopting a sound trading plan, using leverage (max 1:10) and proper risk management.
By Adedapo Adesanya
The United Kingdom via the British High Commission in Abuja has launched two flagship economic reform programmes – the Nigeria Economic Stability & Transformation (NEST) programme and the Nigeria Public Finance Facility (NPFF) -as part of efforts to support Nigeria’s economic reform and growth agenda.
Backed by a £12.4 million UK investment, NEST and NPFF sit at the centre of the UK-Nigeria mutual growth partnership and support Nigeria’s efforts to strengthen macroeconomic stability, improve fiscal resilience, and create a more competitive environment for investment and private-sector growth.
Speaking at the launch, Cynthia Rowe, Head of Development Cooperation at the British High Commission in Abuja, said, “These two programmes sit at the heart of our economic development cooperation with Nigeria. They reflect a shared commitment to strengthening the fundamentals that matter most for our stability, confidence, and long-term growth.”
The launch followed the inaugural meeting of the Joint UK-Nigeria Steering Committee, which endorsed the approach of both programmes and confirmed strong alignment between the UK and Nigeria on priority areas for delivery.
Representing the Government of Nigeria, Special Adviser to the President of Nigeria on Finance and the Economy, Mrs Sanyade Okoli, welcomed the collaboration, touting it as crucial to current, critical reforms.
“We welcome the United Kingdom’s support through these new programmes as a strong demonstration of our shared commitment to Nigeria’s economic stability and long-term prosperity. At a time when we are implementing critical reforms to strengthen fiscal resilience, improve macroeconomic stability, and unlock inclusive growth, this partnership will provide valuable technical support. Together, we are laying the foundation for a more resilient economy that delivers sustainable development and improved livelihoods for all Nigerians.”
On his part, Mr Jonny Baxter, British Deputy High Commissioner in Lagos, highlighted the significance of the programmes within the wider UK-Nigeria mutual growth partnership.
“NEST and NPFF are central to our shared approach to strengthening the foundations that underpin long-term economic prosperity. They sit firmly within the UK-Nigeria mutual growth partnership.”
By Aduragbemi Omiyale
A strategic partnership aimed at accelerating the growth, digital capacity, and sustainability of Nigeria’s 40 million Micro, Small and Medium Enterprises (MSMEs) has been signed by MTN Nigeria and the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN).
The collaboration will feature joint initiatives focused on digital inclusion, financial access, capacity building, and providing verified information for MSMEs.
With millions of small businesses depending on accurate guidance and easy-to-access support, MTN and SMEDAN say their shared platform will address gaps in communication, misinformation, and access to opportunities.
At the formal signing of the Memorandum of Understanding (MoU) on Thursday, November 27, 2025, in Lagos, the stage was set for the immediate roll-out of tools, content, and resources that will support MSMEs nationwide.
The chief operating officer of MTN Nigeria, Mr Ayham Moussa, reiterated the company’s commitment to supporting Nigeria’s economic development, stating that MSMEs are the lifeline of Nigeria’s economy.
“SMEs are the backbone of the economy and the backbone of employment in Nigeria. We are delighted to power SMEDAN’s platform and provide tools that help MSMEs reach customers, obtain funding, and access wider markets. This collaboration serves both our business and social development objectives,” he stated.
Also, the Chief Enterprise Business Officer of MTN Nigeria, Ms Lynda Saint-Nwafor, described the MoU as a tool to “meet SMEs at the point of their needs,” noting that nano, micro, small, and medium businesses each require different resources to scale.
“Some SMEs need guidance, some need resources; others need opportunities or workforce support. This platform allows them to access whatever they need. We are committed to identifying opportunities across financial inclusion, digital inclusion, and capacity building that help SMEs to scale,” she noted.
Also commenting, the Director General of SMEDAN, Mr Charles Odii, emphasised the significance of the collaboration, noting that the agency cannot meet its mandate without leveraging technology and private-sector expertise.
“We have approximately 40 million MSMEs in Nigeria, and only about 400 SMEDAN staff. We cannot fulfil our mandate without technology, data, and strong partners.
“MTN already has the infrastructure and tools to support MSMEs from payments to identity, hosting, learning, and more. With this partnership, we are confident we can achieve in a short time what would have taken years,” he disclosed.
Mr Odii highlighted that the SMEDAN-MTN collaboration would support businesses across their growth needs, guided by their four-point GROW model – Guidance, Resources, Opportunities, and Workforce Development.
He added that SMEDAN has already created over 100,000 jobs within its two-year administration and expects the partnership to significantly boost job creation, business expansion, and nationwide enterprise modernisation.
By Adedapo Adesanya
The Nigerian Exchange (NGX) Limited is seeking review of the controversial Capital Gains Tax increase, fearing it will chase away foreign investors from the country’s capital market.
Nigeria’s new tax regime, which takes effect from January 1, 2026, represents one of the most significant changes to Nigeria’s tax system in recent years.
Under the new rules, the flat 10 per cent Capital Gains Tax rate has been replaced by progressive income tax rates ranging from zero to 30 per cent, depending on an investor’s overall income or profit level while large corporate investors will see the top rate reduced to 25 per cent as part of a wider corporate tax reform.
The chief executive of NGX, Mr Jude Chiemeka, said in a Bloomberg interview in Kigali, Rwanda that there should be a “removal of the capital gains tax completely, or perhaps deferring it for five years.”
According to him, Nigeria, having a higher Capital Gains Tax, will make investors redirect asset allocation to frontier markets and “countries that have less tax.”
“From a capital flow perspective, we should be concerned because all these international portfolio managers that invest across frontier markets will certainly go to where the cost of investing is not so burdensome,” the CEO said, as per Bloomberg. “That is really the angle one will look at it from.”
Meanwhile, the policy has been defended by the chairman of the Presidential Fiscal Policy and Tax Reforms Committee, Mr Taiwo Oyedele, who noted that the new tax will make investing in the capital market more attractive by reducing risks, promoting fairness, and simplifying compliance.
He noted that the framework allows investors to deduct legitimate costs such as brokerage fees, regulatory charges, realised capital losses, margin interest, and foreign exchange losses directly tied to investments, thereby ensuring that they are not taxed when operating at a loss.
Mr Oyedele also said the reforms introduced a more inclusive approach to taxation by exempting several categories of investors and transactions.
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